U.S. Justice Department Threatens to Sue Apple, Book Publishers Over E-book Pricing: Report

Apple CEO Tim Cook introduces the new iPad during an Apple event in San Francisco, California, March 7, 2012. Photo: REUTERS

The U.S. Justice Department is threatening to sue Apple Inc. and five major U.S. publishers for allegedly fixing the price of e-books, according to a report in The Wall Street Journal.

Several of the companies have already begun talks with regulators in an attempt to settle the matter out of court. The five publishers facing lawsuits are Simon & Schuster Inc., Hachette Book Group, Penguin Group (USA), Macmillan and HarperCollins Publishers Inc.

Apple is facing allegations that the company persuaded publishers to change how they priced their e-books before the introduction of the iPad in April 2010. The Cupertino, Calif. unveiled a faster iPad with a sharper display on Wednesday.

Spokespeople for Apple and the publishers declined to comment to the paper regarding its report; however, the paper said the publishers have denied to investigators that they acted jointly to raise prices. A settlement could result in e-books made available to the readers at cheaper prices.

Under an agency model, several of the book publishers set e-book prices themselves and Apple received a 30 percent cut, the report said. That meant hurting the traditional wholesale model, where publishers set the retail price and the retailer will set the sales price.

The pricing model came into force in 2010 after the book publishers had asked Amazon Inc. to increase the price of e-books on its website. Amazon offered new bestsellers at $9.99 to encourage consumers to buy its Kindle readers. Several publishers have argued the practice hurts their ability to sell more-expensive titles. Amazon declined comment, the paper said.

Several class-action lawsuits have been filed in a New York federal court, and the European Union has said it is also investigating certain allegations. Apple moved this month to have the consolidated New York cases dismissed, the paper said.

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